Newcrest Mining: gold plated mega deal predator or prey?

There is plenty of takeover glitter about Australia's $16.5 billion Newcrest Mining – and the question now is whether it is indeed gold.

Street Talk understands the miner's operatives have been busily travelling back and forth between their Melbourne base and the home of its biggest listed peers, North America, in recent months, considering the merits of various options including leading industry consolidation.

The most logical is a scrip-based merger, which could add Newcrest's strong presence in Australia and the Pacific, with a big offshore miner's footprint in other parts of the world.

If Goldcorp is the desired merger party, then the ball looks to have moved firmly into Newcrest's court. Jim Rice

And in terms of the most likely dance partner, fingers are pointing at Vancouver-based giant Goldcorp, which has mines in Canada and Central and South America. If geographical diversification is the goal, then it is hard to find a neater fit.

Putting the two together would create a company with about $6.5 billion revenue and $3 billion earnings in the 2020 financial year, pre synergies, leaping it ahead of the likes of heavyweights Newmont and Barrick Gold. It would be a significant step for what is a highly fragmented industry globally, and a deal of international significance.

Sources reckon Newcrest would prefer to take the merger of equals approach, at least initially. But if push comes to shove, one wonders whether the board, chaired for now by Peter Hay, has the stomach to make a big move.

If Goldcorp is the desired merger party, then the ball looks to have moved firmly into Newcrest's court. While both companies' shares are heavily linked to the gold price, Goldcorp has been punished recently for a soft quarterly operating result, while Newcrest has held up reasonably in the recent market rout.

The other thing Newcrest would have to keep an eye on is the political environment, both in Australia and offshore. It is no secret Australia's politicians have an eye on next year's election and are risk-averse to certain types of deals, as seen at APA Group in recent weeks, while Australian miners have been spurned in Canada in the past.